SEC Staff Considers Proposal on Corporate Political Donations

The Securities and Exchange Commission’s corporate finance division is considering recommending that the agency's commissioners propose rules that could mandate disclosure of corporate political spending and lobbying activities, amid demands for greater accountability in this area.

A group of 10 law professors submitted a rulemaking petition to the SEC last year, and since then the SEC staff has received 301,262 comment letters on the petition – a much bigger than normal response --- Paula Dubberly, deputy director for the SEC’s Division of Corporation Finance, said this week.

The division is now “considering” whether to ask the SEC Commissioners to propose a rule that would “require public companies provide disclosure to shareholders regarding the uses of corporate resources for political activities ,” Dubberly said at a Practising Law Institute securities regulation conference in New York on Monday.

While many companies do make some disclosures about their political activities, there are no formal disclosure rules that make the information comparable between organizations. Companies are hesitant to disclose the donations, saying it is part of ordinary business operations.

But the professors who submitted the petition, including Harvard Law School’s Lucian Bebchuk and Columbia Law School’s John Coffee, said that political spending disclosures should be required. Investor interest in corporate political activity has increased and is part of the information required by investors to hold corporations accountable, they said in their petition. They also noted an increase in corporate political activity since the 2010 U.S. Supreme Court decision in Citizens United v. Federal Election Commission, which removed restrictions on corporate donations.

Meredith Cross, who heads the SEC’s Division of Corporation Finance and oversees its Office of Rulemaking, also said the division’s staff is looking into recommending the Commission issue a rule, but has not yet come to a final decision to do so.

“It’s obviously an issue that’s extremely important to many,” Cross said at the conference. “In light of the large number of comments and strong interest, we thought we should at least note this is something we are thinking about,” she added.

Of the comment letters received by the SEC, more than 1,000 were individual comments and more than 300,000 were form letters, Dubberly said, but the SEC is also receiving pressure from elsewhere. SEC Commissioner Luis Aguilar gave a speech earlier this year urging the Commission to take up rulemaking in this area, and the Coalition for Accountability in Political Spending has taken out billboards near the SEC’s Washington D.C. headquarters. Shareholders have also made a record number of proxy proposals related to corporate political spending and lobbying activities in the 2012 proxy season.